Consumer's Equilibrium Indifference Curve Analysis| what is Assumption of indifference Curve Analysis of Consumer's Equilibrium ?

  IC Analysis as Different From Utility Analysis

  utility analysis

• The basic limitation of utility analysis is that here the determinant of utility is based on the assumption of forgiveness.

• The utility of the recognition of the numerator numbers; For example, it can be expressed in 1, 2, 3 etc.

 Indifference curve analysis

• The concept of indifference curve analysis is based on ordinal measurement.

• According to this concept, utility can only be ranked as high or low.

• It can never be expressed in units like 1,2,3 etc.

Assumption of indifference Curve Analysis of Consumer's Equilibrium

i) The money income of  the consumer is given and does not change.

ii) Both objects are substitutes for each other.

iii) The consumers is prudent.He always maximizes his satisfaction.

  Indifference Set

Indifference set is the combination of two goods that provide the same level of satisfaction to the consumer.

Pay attention to Table 1 which id showing the different combination of apples and oranges.

Different combination of Apples and oranges

Note the above written observation below :

i) Each association provides the same level of satisfaction of the consumers.So combination A=combination B=combination C=combination D.

ii) Such that there is no difference between combinations A, B,C and D. so we can say that the consumer is indifferent across these combinations.Together these combinations from an indifference set of the consumer.

Each point on this curve represents a combination of two goods.Because each combination gives the consumer an equal chance of satisfaction,this point is called the indifference curve.

  Explain Picture 

i) IC is an indifference curve.

ii) The level of satisfaction of the consumer at point A is the same as at point B,C or D.

 Characteristics of indifference curve

i) indifference curve is downward sloping

ii) Higher indifference curve indicates higher level of satisfaction.

iii) indifference curve do not intersect each other.

iv) Indifference curve does not touch x-axis or Y-axis.